The impact of environment, social and governance score on firm performance: Evidence from Japan

Abstract

This study explores the effect of Environmental, Social, and Governance (ESG) 3 performance on firm performance in Japan, focusing on firm’s indicators such as ROA and ROE. By using a dataset of 3,171 firm-year observations from listed companies in Japan between 2014 and 2023, our study employs various 17 econometric models, including the Pooled ordinary least squared regression model (Pooled OLS), the Fixed Effects Model (FEM), Random Effects Model (REM), and Feasible Generalized Least Squares (FGLS), to ensure robust analysis. The results reveal a positive relationship between ESG performance and firm performance, 62 particularly with ROE. These results offer valuable insights for companies, policy makers in the role of ESG in shaping long-term business success in Japan.